Tax experts say that the IRS should start taxing ‘virtual economies’ in games like Second Life, in which the players use real money to trade for virtual products and services, such as land and clothes.

Taxpayer Advocate Nina Olson, whose annual report was published on the IRS website, wrote: “Economic activities associated with virtual worlds may present an emerging area of noncompliance, in part, because the IRS has not issued guidance about whether and how taxpayers should report such activities.

“The IRS should consider doing more to help taxpayers comply with their tax obligations by quickly issuing guidance addressing how to report economic activities in virtual worlds, as well as in other emerging areas of economic activity.”

Gee, thanks. Just the kind of help we want when we go to the cyberworld to escape from reality!